by It’s too early to determine if SVB’s demise heralds a new era for venture capital, but based on anecdotal evidence, confidential discussions and chats with colleagues, it seems like we’re back to business as usual, where fundraising for startups before sales is affected.
No scientific sample, but several investors signaled on Twitter this week that they remain interested in speaking with founders who are still in the idea phase. My Hot Tip: With the contagion contained, the VC community feels good about writing small checks for pre-revenue startups, but Series A and up? Mas o menos.
As long as this downturn continues, these investor questions and answers will be a monthly TC+ column. If you’re a recently laid-off worker considering starting your own business, an H-1B employee who’s made it this far, or just looking for tips and advice that can help you get started with early-stage investors in to get in touch, please read and share.
Thank you to all the investors who took the time to answer these questions in such detail! If you’re an early-stage investor and would like to be included in future columns, email [email protected] with “How to pitch me” in the subject line.
Here are the participants:
- Brian Backeen, General Partner, Lightship Capital
- Masha Bucher, Founder and General Partner of Day One Ventures
- Rebecca Liu-Doyle, Managing Director, Insight
- Clelia Warburg Peters, Managing Partner, Era Ventures
- Nick Adams, Managing Partner and Co-Founder of Differential Ventures
- Lisa Lambert, Founder and President of National Grid Partners
- Elizabeth Yin, co-founder and general partner of Hustle Fund
Brian Backen
What investment opportunities are you looking for in March 2023?
Like many investors, we are optimistic about AI. We made two AI-related investments in April and continue to explore opportunities in this space.
How do you prefer to be approached by a founder with their first pitch: a cold email, a warm intro, or some other method?
We have an online portal at lightship.capital where founders can apply for investments. We do this to avoid an issue with VC investors called “network distortion.” Founders should apply on our portal and keep going Twitter.
What’s one traditional fundraising tactic that founders should ditch from their toolbox—something that no longer works but is still common practice?
Ask for warm introductions and try to build rapport with investors. Spend your time building a great business and you will win investments. I don’t need new friends.
Tell us about the best pitch you received recently. At what point during your presentation did you realize you were going to invest?
I was recently referred by a company called MuseTax. Excellent founders, subject matter experts; the only true. They got me investing in the first 10 minutes. You are busy now.
Do you have any advice that can help a first-time founder stand out?
Don’t focus on investments; focus on design. Don’t let your engineers build you an ugly product with great password reset functionality but limited user value.
Don’t let the engineers tell you it’s not ready yet; It is. Express it and learn.
Design it well and users or investors will follow. Develop the first version well and you will end up with a lot of technical bills and no progress.
What are you reading/watching/listening to?
I keep watching season 1 of Billions. You know, before it got weird 🙂. great show
Masha Bucher
What investment opportunities are you looking for in March 2023?
In a healthy fundraising environment, the best-performing founders often draw on their storytelling skills and their charisma to attract investors. They are the ones who are naturally good speakers and articulate with their vision.
There is a second type of founder with a different background. They are often head-down, rowdy, and resource-oriented. I call them “survivors”. Survivors are often immigrant founders, people of color, women, or others from underrepresented backgrounds.
I believe the survivors are the kind of founders to support during a downturn. They were pushed to be scrappy and survive their whole lives; You are particularly prepared for the demands of the current time. They are good at making something out of nothing and are extremely cost effective.
I’m looking for ways to monetize, business models and ways to profitability. Investors pay much more attention to numbers, business models and how well founders handle finances. Expect many more questions that will challenge the business model.
I look at how much revenue comes from product quality versus marketing. Founders who generate virality based on the quality of the product show they can make money with low marketing spend.
We love companies with high EBITDA. We love companies like Quinn, who have grown to millions in sales in just a year from launch with viral, no-cost marketing on TikTok.
How do you prefer to be approached by a founder with their first pitch: a cold email, a warm intro, or some other method?
Cold email works great, but it’s surprising how few people get it right. In a cold email, every single sentence should convince me to attend a meeting. With every word and every sentence, you need to create a desire for an investor to meet you personally. You must provide a clear reason why they need to meet you now, not next month.
